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HEARING
BEFORE THE
(
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
U.S. GOVERNMENT PUBLISHING OFFICE
WASHINGTON
91517 PDF
2015
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SUBCOMMITTEE
ON
COMMUNICATIONS
AND
TECHNOLOGY
(II)
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C O N T E N T S
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WITNESSES
William T. Lake, Chief, Media Bureau, Federal Communications Commission
Prepared statement ..........................................................................................
Answers to submitted questions ......................................................................
Jessica J. Gonzalez, Executive Vice President and General Counsel, National
Hispanic Media Coalition ....................................................................................
Prepared statement ..........................................................................................
Answers to submitted questions ......................................................................
Bernard Lunzer, President, The Newspaper Guild-CWA ....................................
Prepared statement ..........................................................................................
Answers to submitted questions ......................................................................
Paul J. Boyle, Senior Vice President of Public Policy, Newspaper Association
of America .............................................................................................................
Prepared statement ..........................................................................................
Answers to submitted questions ......................................................................
David Bank, Managing Director, Global Media Equity Research, RBC Capital
Markets .................................................................................................................
Prepared statement ..........................................................................................
Answers to submitted questions ......................................................................
Jane Mago, Executive Vice President and General Counsel, Legal and Regulatory Affairs, National Association of Broadcasters ........................................
Prepared statement ..........................................................................................
Answers to submitted questions ......................................................................
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SUBMITTED MATERIAL
Letter of June 20, 2014, from Michael Copps, Special Advisor, Media and
Democracy Reform Initiative, Common Cause, to Mr. Walden and Ms.
Eshoo, submitted by Ms. Eshoo ..........................................................................
Letter of June 10, 2014, from Jason T. Lagria, Senior Staff Attorney, Asian
Americans Advancing Justice, to Mr. Walden and Ms. Eshoo, submitted
by Mr. Butterfield ................................................................................................
Letter of June 10, 2014, from Wade Henderson, President & CEO, and
Nancy Zirkin, Executive Vice President, The Leadership Conference on
Civil and Human Rights, to Mr. Walden and Ms. Eshoo, submitted by
Mr. Butterfield .....................................................................................................
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(III)
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HOUSE OF REPRESENTATIVES,
COMMUNICATIONS AND TECHNOLOGY,
COMMITTEE ON ENERGY AND COMMERCE,
Washington, DC.
The subcommittee met, pursuant to call, at 10:35 a.m., in room
2123 of the Rayburn House Office Building, Hon. Greg Walden
(chairman of the subcommittee) presiding.
Members present: Representatives Walden, Latta, Shimkus,
Terry, Blackburn, Lance, Guthrie, Kinzinger, Long, Barton, Eshoo,
Braley, Lujan, Rush, Butterfield, and Waxman (ex officio).
Staff present: Ray Baum, Senior Policy Advisor/Director of Coalitions; Sean Bonyun, Communications Director; Matt Bravo, Professional Staff Member; Andy Duberstein, Deputy Press Secretary;
Gene Fullano, Detailee, FCC; Kelsey Guyselman, Counsel, Communications and Technology; Grace Koh, Counsel, Communications
and Technology; David Redl, Counsel, Communications and Technology; Charlotte Savercool, Legislative Coordinator; Tom Wilbur,
Digital Media Advisor; Shawn Chang, Democratic Chief Counsel,
Communications and Technology; Margaret McCarthy, Democratic
Professional Staff Member; and Ryan Skukowski, Democratic Policy Analyst.
Mr. WALDEN. I want to call to order the Subcommittee on Communications and Technology, and welcome you all for our Media
Ownership in the 21st Century hearing, and thank our witnesses
for taking time to be here. We really appreciate your counsel and
your testimony.
I will open with my opening statement, and then we will move
to Ms. Eshoo for hers.
SUBCOMMITTEE
ON
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON
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tions for a media industry that serves consumers in this century
and not in the last. The Ford administration, as noted there, with
one chairman of the subcommittee posed with Mr. Ford, just to put
in context how things have changed, beyond just my hairline.
In todays media environment, traditional media like Bend, Oregons, KTVZTV and the towns Bulletin newspaper compete with
Twitter, The Drudge Report, The Huffington Post, Fox News,
MSNBC, CNN, the Wall Street Journal, and the New York Times.
You can get it all right there. We live in an era of a 24-hour news
cycle and on-demand national media, but our laws assume a world
where local newspapers and broadcast stations are so influential
that economies of scale are dangerous to the public interest. While
proponents of the status quo express their love of localism and the
laws intended to guarantee it, I fear that laws intended to ensconce
our love of local media are, in fact, loving it to death.
Promoting localism is a goal that we all share; but localism is not
cheap. Producing the kind of high-quality content that has been the
hallmark of American broadcasting is an expensive labor of love for
local broadcasters and newspapers, and as Americans habits have
changed, so too should the way we look at local media. We live in
a competitive landscape where increasingly we cherry pick articles;
we scroll through feeds and aggregators; and we have multiple national news programming options, and we DVR almost everything
to time-shift the programming that we love. It is a different world,
so why dont our media laws reflect these changes?
The fact is, the FCC has tried to change these rules as early as
its 2002 review of media ownership rules, when it recognized the
competitive force of the Internet. The Commission would have done
away with the ban on cross-ownership of a daily newspaper and a
broadcast station, and expanded the caps on local ownership of television and radio stations, but the courts overturned the FCCs proposed rule, not because it believed that repeal was unreasonable.
In fact, the court determined that, and I quote, reasoned analysis
supports the Commissions determination that the blanket ban on
newspaper/broadcast cross-ownership was no longer in the public
interest. The Third Circuit threw out the proposed new rules because it thought the Commission relied too heavily on the Internet
as a significant competitive factor. I wonder what the court would
say today if the same proposal were before it, now that newspapers
annual revenues are down more than half since 2003. Would the
same bench consider the Internet a significant competitive factor
now that the average online video ad often outprices national TV
day-parts?
Sadly, following two court losses, it seems that for a while the
FCC simply gave up on trying to save this industry from antiquated regulation. The Commission failed to complete the 2010
quadrennial review, its statutorily mandated review of media ownership rules, and instead has doubled down by making changes
that make it more difficult for local media to compete. The Commissions recent decisions to unwind many joint sales agreements
and to look askance at shared service arrangements ignore the realities of the broadcast business and are affirmatively harmful to
the localism they purport to protect.
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I am happy to see that the Commission intends to return to reasoned rulemaking consistent with its statutory mandate. Chairman
Wheeler has announced his intention to comply with the law and
complete the 2014 quadrennial review in a timely manner. And
while the law is very specific in the Commissions mandate to deregulate media ownership where warranted, given the recent set of
FCC decisions, I am, to quote the man for whom this room is
named, comforted very little. Without relief, I fear that local
broadcast and newspaper companies will continue to struggle
against unregulated competitors whose businesses are not hamstrung by decades-old regulatory assumptions. Newspaper classified advertising peaked in 2000 at $19.6 billion. In 2012, classified
advertising brings in $4.6 billion. That is a 77 percent drop in revenues just from classified advertising, primarily due to shifts in
classifieds to such Internet entities as Craigslist. Unsurprisingly,
hundreds of newspapers have shuttered operations or migrated to
digital-only since 07, and the U.S. has lost 62 daily newspapers
since 2004.
We are all committed to promoting a local media industry that
is healthy; to fostering competition, localism, and diversity of
voices, and to ensuring that local media continues to serve the
needs of their communities, but pretending that laws designed for
an era before smartphones and the Internet will get the job done
is an effective death sentence for many local media outlets.
I would like to thank our witnesses again for joining us today to
offer their opinions on these matters. We appreciate your taking
the time, and we look forward to your testimony.
[The prepared statement of Mr. Walden follows:]
PREPARED
STATEMENT OF
What do the founding of Microsoft, the first episode of Saturday Night Live, and
the establishment of the broadcast/newspaper cross-ownership ban have in common?
They are all about to turn 40, because they all took place in 1975. But where Microsoft has innovated and moved past a world where MSDOS was the state of the
art, and Saturday Night Live continues to reinvent itself as an essential piece of
Americana, the media ownership rules persist as though the Internet simply doesnt
exist. Our laws need to reflect the reality of the world we live in today, not the
world of the Ford administration. It is my sincere hope that todays discussion can
spur us to rationalize the rules and regulations for a media industry that serves
consumers in this centurynot the last.
In todays media environment, traditional media like Bend, Oregons KTVZTV
and the towns Bulletin newspaper compete with Twitter, The Drudge Report, The
Huffington Post, Fox News, MSNBC, CNN, the Wall Street Journal, and the New
York Times. We live in an era of a 24-hour news cycle and on-demand national
media, but our laws assume a world where local newspapers and broadcast stations
are so influential that economies of scale are dangerous to the public interest. While
proponents of the status quo express their love of localism and the laws intended
to guarantee it, I fear that laws intended to ensconce our love of local media are
loving them to death.
Promoting localism is a goal we all share; but localism isnt cheap. Producing the
kind of high-quality content that has been the hallmark of American broadcasting
is an expensive labor of love for local broadcasters and newspapers. And as Americans habits have changed, so too should the way we look at local media. We live
in a competitive landscape where increasingly we cherry pick articles; we scroll
through feeds and aggregators; we have multiple national news programming options, and we DVR almost everything to time-shift the programming we love. Its
a different world, why dont our media laws reflect these changes?
The fact is, the FCC tried to change these rules as early as its 2002 review of
the media ownership rules, when it recognized the competitive force that is the
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Internet. The Commission would have done away with the ban on cross-ownership
of a daily newspaper and a broadcast station and expanded the caps on local ownership of television and radio stations. But the courts overturned the FCCs proposed
rule notbecause it believed that repeal was unreasonable. In fact, the court determined that reasoned analysissupports the Commissions determination that the
blanket ban on newspaper/broadcast cross-ownershipwas no longer in the public interest. The Third Circuit threw out the proposed new rules because it thought the
Commission relied too heavily on the Internet as a significant competitive factor. I
wonderwhat the court would say if the same proposal before it todaynow that
newspapers annual revenuesare down more than half since 2003. Would the same
bench consider the Internet a significantcompetitive factor now that the average online video ad often outprices traditional TV day-parts?
Sadly, following two court losses it seems that for a while the FCC simply gave
up on trying to save thisindustry from antiquated regulation. The Commission failed
to complete the 2010 quadrennial reviewits statutorily mandated review of media
ownership rulesand instead has doubled down by makingchanges that make it
more difficult to for local media to compete. The Commissions recent decisions to
unwind many joint sales agreements and to look askance at shared service arrangements ignore the realities of the broadcast business and are affirmatively harmful
to the localism they purport to protect.
I am happy to see that the Commission intends to return to reasoned rulemaking
consistent with its statutory mandate. Chairman Wheeler has announced his intention to comply with the law and complete the 2014 quadrennial review in a timely
manner. And while the law is very specific in the Commissions mandate to deregulate media ownership where warranted, given the recent set of FCC decisions, I am,
to quote the man for whom this room is named, comforted very little. Without relief, I fear that local broadcast and newspaper companies will continue to struggle
against unregulated competitors whose business models are not hamstrung by decades-old regulatory assumptions. Newspaper classified advertising peaked in 2000
at $19.6 billion; in 2012, classified advertising brings in $4.6 billiona drop of 77
percent in just over a decade, primarily due to shifts in classifieds to such Internet
entities as Craigslist. Unsurprisingly, hundreds of newspapers have shuttered operations or migrated to digital-only since 2007, and the U.S. has lost 62 daily newspapers since 2004.
We are all committed to promoting a local media industry that is healthy; to fostering competition, localism, and diversity of voices; and to ensuring that local
media continues to serve the needs of their communities. But pretending that laws
designed for an era before smartphones and the Internet will get the job done is
an effective death sentence for many local media outlets.
Id like to thank our witnesses for joining us today to offer their opinions on how
we might improve our media ownership rules. We appreciate your taking the time
to join us today, and were looking forward to hearing what you have to say.
Mr. WALDEN. And with that, I would recognize the ranking member of the subcommittee, the gentlelady from California, Ms. Eshoo,
for her opening statement.
OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Ms. ESHOO. Thank you, Mr. Chairman. And welcome to the witnesses, and thank you for being willing to testify today at this important hearing that the chairman has called.
I believe that one of the most important manifestations of a vibrant democracy is that there are many voices speaking to the
many, and so whatever I say in my opening statement really fits
in with that principle because I think it is such an essential one,
and I think it is one that should guide us in everything that we
do relative to these undertakings in the examination of media ownership in this, the 21st century.
In an era when corporate media outlets have become increasingly
concentrated in the hands of a few conglomerates, our goal, and the
chairman mentioned this, should be to promote localism, advance
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competition, and encourage diversity, not to roll back what few protections we have in these key areas. I would like to put forward
some facts that I find troubling. Despite a national broadcast television ownership cap, 10 station groups now own over 650 stations,
or nearly 12 of all commercial full-powered broadcast stations in
the United States. The source of that is free press. Ten companies
control 55 percent of all local TV advertising revenues. Twenty-five
percent of the Nations 952 local news stations do not produce their
newscast themselves. You combine these statistics with the fact
that 20 out of the top 25 news Web sites rely heavily or even exclusively on news gathered from traditional media sources, such as a
daily newspaper, broadcast network or a cable news network, and
you have a picture of what I think is an unhealthy media landscape.
So as the FCC takes steps to close existing loopholes in its rules,
I am pleased that the Agency is moving forward with its review of
our Nations broadcast ownership rules. The completion of the long
overdue 2010 quadrennial review and the 2014 review will ensure
the FCC can fully assess the impact of further consolidation on
ownership, diversity and localism in our Nations media system.
And while some have criticized the FCC for cracking down on sidecar deals before concluding its 2010 review, I think that the Agency
has an obligation to enforce the existing rules on the books, regardless of the outcome of its review.
Congress has long entrusted the FCC with upholding the core
values of competition, localism and diversity of media, and while
the media landscape may change, and we welcome those changes,
the role that the these values play in advancing public disclosure
and strengthening our democracy, I think, should remain intact.
So again, thank you to our witnesses, and I would like to not
only submit for the record a letter written by Common Cause, Mr.
Chairman, supporting FCC action on JSAs, and I would like to
yield the remainder of my time to Mr. Butterfield.
Mr. WALDEN. Without objection.
[The information follows:]
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Ms. ESHOO. Thank you.
OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH
CAROLINA
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Mr. BUTTERFIELD. All right. Thank you.
Mr. WALDEN. Are there any members on our side seeking an
opening statement? OK. Mr. Waxman, I would turn to you.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
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LA Times. The original terms would have forced the LA Times to
rent its own building from the Tribune Company, and to borrow
over $300 million to pay a cash dividend to the Tribune Corporation. I raised questions and consulted with independent media experts who advised that the terms could cripple the LA Times. To
its credit, the Tribune Corporation has recently reduced the size of
the cash payment it will demand from the newspaper, LA and
other newspapers. I hope it will take further steps to ensure the
viability of the Times before the deal is complete.
Finally, our discussion today would be incomplete without an examination of the abysmal state of media ownership diversity.
Women and minorities represent a tiny fraction of the owners and
decision-makers in the media companies that shape our national
discourse. The FCC has had great difficulty crafting policies that
could improve ownership diversity and survive legal challenge. I
hope todays witnesses can bring some fresh thinking and new
ideas to help advance this issue, which is so critical for a healthy
democracy.
I thank all the witnesses for being here today. I must apologize
in advance that I have to be present at another subcommittee, and
wont be here for all of your testimony. I will try to get back for
questions, but I appreciate your participation and I look forward to
reviewing what you have to say, both orally and your written submissions.
Thank you, Mr. Chairman. Yield back my time.
Mr. WALDEN. Thank you, Mr. Waxman. And I will turn now to
the vice chair of the subcommittee, Mr. Latta, for opening comments.
OPENING STATEMENT OF HON. ROBERT E. LATTA, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO
Mr. LATTA. Well, thank you, Mr. Chairman, and thank you very
much for holding todays hearing, and I appreciate all the witnesses being with us today.
The media landscape, much like many other sectors in the communications and technology industry, has evolved considerably
over the last 20 years. With the introduction of the Internet and
digital technology, we have seen convergence, increased competition, innovative content delivery services, and rapidly shifting preferences in consumer demand come to define the media market.
However, many of the laws that govern this space are outdated. As
a result, long-time industry participants that are subject to these
rules and regulations are placed at a competitive disadvantage to
newer market entrants. This has thwarted their ability to flexibly
and quickly respond and compete in this dynamic marketplace. Of
particular concern is the FCC has been negligent in completing its
mandatory review of the media market that could help address todays competitive realities.
As we continue our efforts to examine the Communications Act
and consider updates to the law that would better reflect the 21st
century communications landscape, I look forward to hearing from
our witnesses today about the current regulatory framework governing media ownership and the impact that it is having on businesses, consumers, and the economy.
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And, Mr. Chairman, if I could, I would yield to the gentleman
from Illinois.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
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First, the Quadrennial Review. The FCC is very aware of its responsibility to review its media ownership rules every 4 years. As
you know, in March the Commission began its most recent review,
adopting a Further Notice that builds on the record of the ongoing
2010 proceeding. The Further Notice analyzes the evidence to date
on each of the rules, and discusses the diversity issues remanded
to the Commission by the Third Circuit.
I recognize that some observers, including members of the subcommittee, are concerned that the Commission has yet to complete
its 2010 Quadrennial Review. As Chairman Wheeler noted in
March, the Commissions inability to complete that review was not
for lack of effort. We began the proceeding early in November 2009,
compiled an extensive record, and circulated a proposed Order in
2012, which remained before the Commission for over a year but
failed to receive a majority. The Further Notice will enable all interested parties to supplement the record with information about
the 2014 marketplace. The Chairman has committed to present
recommendations to the Commissioners by June 30, 2016.
Second, shared services agreements, or SSAs. As part of the Further Notice, the Commission sought to improve its understanding
of the sharing of services between separately owned TV stations.
The Commission does not now require SSAs to be disclosed, and
that makes it hard for us or the public to know what impact these
agreements may have on our policies. The Further Notice invites
comment on whether and how best to disclose SSAs.
Third, TV joint sales agreements or JSAs. The Commission also
adopted a report and order on TV JSAs. JSAs are agreements between stations in which one station sells advertising time on behalf
of the othertypically, all of it. Unlike SSAs, they are well known
to the Commission. We have long recognized our duty to identify
any interests that give holders a realistic potential to influence a
stations programming or operations. We treat such interests as attributablethat is, we count the stations as being commonly owned
for purposes of our ownership rules. The Commission tentatively
concluded in 2004 that it should attribute TV JSAs just as it had
done for radio JSAs in 2003. The rationale is that someone who
controls a stations main source of revenue has a significant potential to influence the stations operations.
Based on the record, and in light of the growing prevalence of TV
JSAs, the Commission decided that it should attribute these agreements with a 2-year transition period for existing JSAs, as we had
done for radio.
Finally, I can provide a bit of context for the Media Bureaus
Public Notice in March, which gave guidance to the industry on
how the Bureau will process pending and future TV license transfer applications. In releasing the Public Notice, the Bureau sought
to provide greater transparency to the industry about concerns that
had come to light in our review of proposed license transfers.
Transactions we have seen in recent years have involved increasingly complex relationships between stations that our rules do not
allow to be jointly owned. In particular, more and more transactions involve combinations of sharing arrangements and financial
ties, such as options and loan guarantees. We have found that determining the economic effects of a transaction requires much more
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extensive analysis when stations have such complex entanglements, and, though we must decide each case on its particular
facts, case-by-case decisions by themselves may not give broadcasters the predictability they want as they structure deals.
The Public Notice is intended to increase transparency by making sure that broadcasters appreciate that deals involving complex
interrelationships require more extensive review, and by highlighting the combinations of relationships that we have found most
troubling as we evaluate whether one station may have undue influence over another. By arming the parties with this knowledge,
we sought to guide them as they structure future deals or consider
amendments to pending transactions.
From what we have seen so far, this increased transparency has
been helpful. Far from coming to a halt, deal-making in the industry continues. Since mid-March, we have approved the sale of 36
full power stations, representing 12 different deals.
Again, thank you for the opportunity to be here today, and I am
happy to take any questions.
[The prepared statement of Mr. Lake follows:]
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Mr. WALDEN. Mr. Lake, thank you for your service and for your
testimony. We look forward to continuing the discussion.
We will now go to Jessica J. Gonzalez, Executive Vice President
and General Counsel, the National Hispanic Media Coalition. Ms.
Gonzalez, thank you for being here. Please go ahead.
STATEMENT OF JESSICA J. GONZALEZ
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Immediately after the 1996 Act, relaxed ownership limits and the
minority tax certificate was abandoned, women and people of color
were pushed from the market as conglomerates grew. According to
a 1997 NTIA report, relaxed ownership limits created a significant
competitive advantage for group owners who are more likely to be
nondiverse and have greater financial resources. That media concentration drove up station prices.
The FCCs recent JSA ruling, on the other hand, creates opportunities for diverse owners and small businesses to enter the market.
An agency envisions a country in which broadcasters reflect
American multiculturalism and serve the information needs of all
communities. Promoting diversity and localism with strong media
ownership rules within the FCCs existing regulatory framework,
and using your law-making power to reinstate the minority tax certificate, are important steps towards achieving that vision.
Thank you and I look forward to questions.
[The prepared statement of Ms. Gonzalez follows:]
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Mr. WALDEN. Ms. Gonzalez, thank you for your powerful testimony. We appreciate your comments.
We will now turn to Mr. Bernard Lunzer, President of The Newspaper Guild-CWA. Mr. Lunzer, thank you for being here. We look
forward to your testimony as well, sir.
STATEMENT OF BERNARD LUNZER
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We believe the goal of restricting JSAs where more than 15 percent of sales are attributed to another station is a good one. We
also agree with the FCC about studying SSAs to see if similar restrictions would be in order. There needs to be a procedure and a
test to revive such stations, allowing for more hiring, diversity of
coverage, and the potential for diversity of ownership. The FCC is
on the right track, if that really is the goal.
Again, further concentration will make this worse. The status
quo continues the current dilemma. Only new guidelines will provide for a better competition, and a robust landscape that may
allow for diversity of ownership, which is at scandalous levels, as
has already been discussed here.
Let me also strike at the heart of the myth of diverse content,
because the Internet is adding so many voices. This is a very important point. Much of what the Internet has added is opinion, not
well-sourced and not particularly helpful. A Pew Study of Baltimore Tribune Paper in 2012 demonstrated that although there
were 53 news outlets for local content, 83 percent of stories were
repetitive, with no new information. Legacy print content providers
accounted for 48 percent of content, with local broadcast providing
about 13. Almost no breaking information came from the nonlegacy
platforms. Since the study, the Baltimore Sun, the principle provider of news, has shrunk substantially.
As a labor union that cares deeply about democracy, we believe
further concentration will mean less credible news and information
to citizens as major debates take place over the future of America.
Citizens should expect their rights to be paramount over broadcasters, as has been established in law. We need real innovation
and investment as we continue forward in the 21st century. Consolidating existing organizations with fewer employees does not get
us there.
I would also note that the breaking news last night on the Virginia election, I got that through a print source that actually came
in through a tweet. The original news actually came from a print
organization.
I look forward to any questions. Thank you.
[The prepared statement of Mr. Lunzer follows:]
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Mr. WALDEN. Mr. Boyle, you are now recognized for your 5 minutes.
STATEMENT OF PAUL J. BOYLE
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ample, two of the primary news sources that broke and dug deep
into the story about mismanagement at the Department of Veterans Affairs were newspaper-television combinations in Arizona
and Ohio. This was not a surprise. Public service journalism is a
part of their DNA.
According to FCC Commission research, a cross-owned television
station produces 50 percent more local news, devotes 40 percent
more time to candidate speeches, and airs 30 percent more coverage of State and local political candidates. Removing the crossownership restriction would serve, not harm communities. It is
time to eliminate this barrier that has stifled much-needed investment in local journalism.
Thank you and I look forward to your questions.
[The prepared statement of Mr. Boyle follows:]
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Mr. WALDEN. Mr. Boyle, thank you for your testimony. We will
now go to Mr. David Bank who is the Managing Director of RBC
Capital Markets.
Mr. Bank, we especially appreciate your testimony today, and
look forward to hearing it. So thanks for being here.
STATEMENT OF DAVID BANK
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ing point to view the framework through which we might want to
evaluate the relevance of current rules to the existing ecosystem.
In terms of traditional media, there is probably no surprise that
consumers still spend more of their time with television than any
other medium, as they have for decades, including the time period
in which the current regulatory framework was constructed. However, the consumption within the TV paradigm has shifted greatly
in a way not necessarily reflected in a regulatory paradigm shift.
The primary shift has been the consumption of TV moving meaningfully from a world dominated by broadcast content, to an increasingly fragmented one where the American viewer now consumes the majority of TV content from dual-stream advertiser and
subscription fee-supported cable channels.
Exhibit 2 illustrates, even 10 years ago, the majority of adult 18
to 49 primetime audiences was not on the big 4 networks, but rather skewed slightly more toward nonbroadcast. Today, that shift is
even more pronounced with broadcast controlling only about 13 of
the primetime audience. As a result, it is clear to us that broadcast
TV regulation should probably consider a framework in which paid
TV in total, as an ecosystem, is a competitor. This is the case in
small and big markets alike.
Further, TV isnt the only medium that has seen an increased
fragmentation audience over the past 15 years. The radio ecosystem has clearly undergone an evolution beyond simply a broadcast transmitter since the time when the regulatory framework was
constructed. Broadcast radio has probably been less impacted by
the advent of traditional subscription services, such as Sirius satellite radio, than the television ecosystem, despite the fact that Sirius has 26 million paying subs today with millions more of trials
and inactive radios currently on the road just waiting to be activated. This has eaten into traditional radios share of the audience
on some level, but radio has been more directly impacted by the advent of the Internet, with services such as Pandora, Spotify or
download and podcast services on iTunes, especially on a nonsubscription basis. Simply considering, digital radio services offers
a framework for which the world has dramatically changed.
Digitals audience skews younger, but the trend of total population penetration is irrefutable, as illustrated in Exhibit 3. Digital
radio listeners are now at mass market proportions, representing
just more than 12 the population and 23 of Internet users. Clearly,
the game has changed in radio with respect to consumer behavior.
This has also put some pressure on the typical radio business
model.
The newspaper business model is not a major focus in our coverage universe, but it is quite clear that the industry has undergone a great deal of tumult, in no small part due to changes in consumer behavior and alternatives as well. Most specifically, consumers simply have more choices with respect to how to consume
news.
In 1975 when the newspaper/TV cross-ownership rules were essentially constructed, consumers had no digital or cable news
choices. By 2003, over 10 years ago, consumers were getting 20 percent of their news from online sources. Today, that figure is around
40 percent, as illustrated in Exhibit 4. That is an astounding
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change in consumer behavior, having a material impact on the ecosystem.
The bottom line regarding these shifts in the ecosystem is that
they seem to call into relief what some of the existing regulatory
framework might not. Digital media has now created, at least on
the macro level, a powerful competitor to the media ecosystem that
existed in isolation in the prior century. The markets are keenly
aware of it. It plays a significant role in the way they fund growth
and choices that consumers have.
That said, there have been some movements more recently on
the part of the FCC to re-regulate some elements of media ownership, and ownership concentration issues in the TV landscape in
particular. The merits of these rule changes specifically arent what
we would focus on in this venue, but rather, we put the focus on
the isolated nature of the rule changes, without consideration to
adjacent issues. For instance, the UHF discount itself is probably
something increasingly obsolete in an evolved ecosystem where
most people under the age of 40 couldnt tell you the difference between a UHF or a VHF station; there is no separate dial on the
cable box, but rather the choice to address such changes on a piecemeal basis adds limited visibility to the financial marketplace. The
financial markets would probably have found it more constructive
to view the UHF discount rule considered in a broader framework
related to overall ownership cap regulation. The financial markets
sometimes struggle with how to interpret broader ramifications.
That concludes my prepared remarks. I would like to thank
Chairman Walden, Ranking Member Eshoo, and the subcommittee
members for giving me the opportunity to speak today.
[The prepared statement of Mr. Bank follows:]
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73
Mr. WALDEN. Thank you, Mr. Bank. We appreciate your testimony. Thanks for coming down.
We will now turn to Jane Mago, who is the Executive Vice President and General Counsel, Legal and Regulatory Affairs, The National Association of Broadcasters, for our final testimony from our
witnesses today. Ms. Mago, thanks for being back before the subcommittee. We look forward to your comments.
STATEMENT OF JANE MAGO
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To maintain the ability to provide quality local service, and compete with newer technologies, broadcasters need a more level playing field with our competitors.
That leads to my second point. Broadcast ownership rules must
keep pace with market changes. Congress wisely required the FCC
to take a fresh look at the ownership rules on a regular basis, in
light of competition, and repeal or modify those that no longer
serve the public interest, but the FCC has failed to follow your direction. The last review was done in 2007, and rather than complete the most recent Quadrennial Review, as required by statute,
the Commission rolled its 2010 review into 2014, and then announced that it would not likely complete that review until at least
mid-2016.
NAB is challenging this most recent FCC decision in court, not
just because the FCC failed to live up to its statutory obligation,
but also because the Commission is imposing new restrictions on
joint sales agreements amongst television stations, despite the fact
that these agreements have produced tangible public interest benefits. NAB has shown that these agreements produce more news,
more foreign language television, and other community-focused
programming. Amazingly, the new rules will force broadcasters to
unwind agreements that the Commission had previously approved.
Finally, consideration of the broadcast ownership rules must be
based on real evidence, not speculation. To address this, NAB asks
Congress to undertake an examination of how the FCCs administration of the broadcast ownership rules has stifled investment and
opportunity in broadcasting. In this time of intense consolidation in
other parts of the communications industry, these ownership rules
are increasingly outdated and have significant harmful consequences on local media. Regulatory practices that starve media
of capital investment are a proven failure. They serve no one. Not
current broadcasters, not interested new entrants, and most importantly, not the American people.
In sum, NAB is asking for you to ensure timely and fair revision
of the broadcast ownership rules. Maintaining the status quo, creating new restrictions, or even just kicking the can down the road
is a disservice to the American people.
Thank you and I am happy to answer any questions.
[The prepared statement of Ms. Mago follows:]
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86
Mr. WALDEN. Ms. Mago, thank you for your testimony. We appreciate it. And we thank all of you for sharing your thoughts with
us today.
We will go now into the Q and A portion of our hearing.
So, Mr. Lake, in the Sirius-XM merger in 2008, the Justice Department acknowledged that satellite radio services do not just
compete with each other, but with a broad array of possible consumer substitutes, including AM and FM radio, CDs, iPods and
other MP3 players. And as you know, many new cars now have
docking stations or Bluetooth capability to connect all that up with
other audio services, including Internet radio Web casting over WiFi, cell phones and other handheld wireless devices, and the new
digital HD radio receivers, which allow old-fashioned broadcasters
to send up to three digital channels of programming over AM and
FM bands, bundled together with the XM analog channel. Terrestrial broadcasters now contend with Spotify and Pandora and other
services, so it is a much-changed audio market in terms of competition for ears.
What is the delay? How do you justify not changing the radio
rules on ownership?
Mr. LAKE. We have looked very carefully at that in our 2010 review
Mr. WALDEN. Yes.
Mr. LAKE. We have compiled a great record, and we are looking
at those trends in the use of radio and other audio sources. They
havent indicated to us yet that we should change the local radio
rules.
Mr. WALDEN. Really?
Mr. LAKE. Again, we have just called for further input. We are
very interested in knowing how
Mr. WALDEN. Have you changed anything relative
Mr. LAKE [continuing]. The market will change in 2014.
Mr. WALDEN [continuing]. To the radio rules since 1996?
Mr. LAKE. No, those rules have not been changed
Mr. WALDEN. Right.
Mr. LAKE [continuing]. Since Congress put the current
Mr. WALDEN. Do you think the market has changed since 1996
in terms of audio offerings and competition in the audio marketplace?
Mr. LAKE. The entire marketplace has changed, both audio
and
Mr. WALDEN. But the rules have not.
Mr. LAKE. Our task is to try to determine in thisat the current
state of evolution, what are the appropriate rules. And, again, we
are very open to all input on that subject.
Mr. WALDEN. Because I sense from your testimony you are not.
I mean it kind of indicates you are going to go with the existing
rules. Right?
Mr. LAKE. What we have done, I think, is to analyze the record
as it now stands. We have a very extensive record, but we are very
open to further input, and
Mr. WALDEN. Yes.
Mr. LAKE [continuing]. I think if you read
Mr. WALDEN. So
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Mr. LAKE [continuing]. The Further Notice carefully, it says what
it says, which is that we are open to all further input. Thoseall
of the issues are open.
Mr. WALDEN. OK. I am glad to hear that because, as you know,
I was a radio broadcaster, we had to do the Olympic ring theory
to justify having two AMs and three FMs in a market that was,
I dont know, several hundred square miles probably. And ours had
competition with XM and Sirius. That was really before Pandora
took off. I have got five audio platforms out there, and you all
allow, and justice allowed XM and Sirius to merge, and said here
is the marketplace as we see it. And then for broadcasters, you say,
no, no, no, you cant have another platform in a market. We, frankly, rescued some stations that were in pretty bad shape, and restored local programming, split them apart. I just think you guys
dont get it, that the marketplace has changed dramatically. And
the statute requires you to get it. And here we have been a Quadrennial Review, and for a whole set of reasons, not yours, you dont
have a vote at the Commission so I am picking on you, but not
really, OK, but the message will get through because I imagine the
Commissioners listen in occasionally. And I just wonder, television
has changed, newspapers are going broke, Craigslist has done
amazing things to classified advertising. Mr. Lunzer, you probably
dont have a lot of people working in the classified ad bureau anymore, do you? And a lot of it was propped up by legal notice requirements through the housing crash with foreclosures. That
made up a lot of revenue, but that is going away, and I worry
about the future of newspapers. I dont even like what they write
about me sometimes and I still worry about them. Some of the
time. Yes, well, but the point is it is a vibrant marketplace, and
I think our rules are outdated. And so, again, I worry about what
you are doing with the JSAs, because I sense from your testimony,
Mr. Lake, it is almost like you think that the sales department controls the news department.
Mr. LAKE. The conclusion we reached with respect to both radio
and TV JSAs is that, if one station controls the principal source of
revenue for another, it is likely to have an influence, or the ability
to influence, the conduct of the second station. And that is the test
under our attribution rules.
Mr. WALDEN. OK. I would like to go to Ms. Mago. You said that
because of some consolidation, the market is actually better served.
What is your evidence for that?
Ms. MAGO. We showed a number of different markets where
there was the specific advantages that came from the shared services arrangements. For example, in Wichita, Kansas, they were
stations were able to do a JSA combination to provide the first
Spanish language news in the entire State of Kansas. Similarly, in
a situation in Eureka, California, you had two stations that didnt
have any local news at all. By combining their resources to be able
to get the efficiencies that came through those shared operations,
both were able to start news operations in the Eureka market
where there had only been one before that, and that is something
that was a great advantage to the communities.
Mr. WALDEN. All right, my time has expired. Thank you all for
your testimony and the work you do in this area.
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Ms. Eshoo for 5 minutes.
Ms. ESHOO. Thank you, Mr. Chairman, and thank you to each
one of our guests today.
Varying views and I have listened hard to what each one of you
said, and I cant help but think that some of my thinking relative
to whatsome of the testimony is the opposite of what you said.
And so I want to go the other way and test out some of the things
that have been put out about how great media consolidation is and
how well it serves our country.
I started out today by stating I think one of the most important
principles relative to a democracy. Now, our democracy is old, Indias I think is large and vibrant as well, but would anyone suggest
that because that is an old idea, it is a bad one, that we should
take up something that would change the whole idea of democracy?
I dont think so. So Iwhile I celebrate the new platforms, the new
services, so many of them, I willI would be willing to wager the
majority of them, being established in my congressional district,
that we need to examine this in terms of what consolidation is actually going to do for the American people.
I understand business models, capital markets, how they want to
invest, what is going to serve them well. Thatin many ways,
many of those business approaches were blown apart in 2008 when
we had a near total economic collapse in our country. That was one
hell of a business model that was brought to the American people.
So I think that, you know, it has been said that, you know, nothing
has changed since 1975, we are out of touch with ourselves and
markets, and what we need to do, I would suggest that some of the
business models are out of touch with what the American people
should be receiving. I dont know who is going to stand next to the
model that Ms. Gonzalez described. I mean that is really, as the
chairman said, powerful testimony.
So if we consolidate more, are minorities in our country going to
progress? No one addressed that. I never heard anyone address
that. So if you have some points to make on that, I think it would
be terrific, but honestly, I just dontI think that people care. They
care enormously if, in their market, there is one outfit that owns
the newspaper, runs the TV stations and the radio stations, what
kind of line of information, what is the value and the texture and
the fabric and the content of just that one line being fed to people?
I think that there are some countries in the world where we shun
and make fun of that model because this one line to people. I want
to hear diversity of thinking, and I would suggest that there is a
lot of junk out there too, even though we have many more things
at our fingertips, and for, you know, for the broadcasters, God bless
you, you do a lot of things forin terms of localism, we have had
testimony on that, but you also have the airwaves that belong to
the American people, and you dont pay for that. So that is a pretty
darn good deal. So why would I want to consolidate something even
more? For what? What is the reason? I mean what is the prime
reason? Anyone have an answer to that? What is the prime reason?
Is it for a better business model for someone, or is this in the name
of democracy, localism, diversity, competition?
Ms. MAGO. If I can
Ms. ESHOO. I mean, I think that is the central question here.
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Ms. MAGO. If I can, Ranking Member Eshoo. I think I would like
to put the right perspective on this of what we want, and what I
what broadcasters are calling for is a healthy, vibrant broadcast industry, and I think it can achieve all of those goals that you were
just talking about.
Ms. ESHOO. Yes, well, I dont know how though. Ithat is
Ms. MAGO. By being able to compete in the current ecosystem.
You cannot simply look at the broadcast industry as if it is only
in its own little bubble. You have to recognize all of the changes
that we talked about here this morning, and recognize that for
broadcasters to createbe able to provide the kind of local information, the kind of truly competitive services that we have to have
the kind of
Ms. ESHOO. Well, I
Ms. MAGO [continuing]. Autonomy to do that.
Ms. ESHOO [continuing]. Appreciate you jumping in, and I am
I think it is very interesting today that there is not a camera here.
We have print media that is here, but I dont know
Mr. WALDEN. The camera is right there.
Ms. ESHOO [continuing]. Are we Webcast or
Mr. WALDEN. Sure. Of course.
Ms. ESHOO. Is CSPAN carrying this?
Mr. WALDEN. It is up to them to carry it or not. We dont
Ms. ESHOO. I see.
Mr. WALDEN [continuing]. Dictate it.
Ms. ESHOO. Well, I am
Mr. WALDEN. Yes.
Ms. ESHOO. I am proud that the print media is here, so
Mr. WALDEN. We have print over here. We have print. Raise your
hand if you are with the newspeople.
Ms. ESHOO. I will submit my questions to you, but I really think,
Mr. Chairman, that, when you look across America, we really have
to understand what more consolidation is going to do, and myself,
I dont think it really feeds democracy simply to consolidate because that is someones business plan. I just dont buy that. I have
seen a lot of peoples lives wrecked and bad information being put
out in the region as a result of it. I dont want more than that.
So thank you very much, and I will submit my questions to the
witnesses for their response. Thank you.
Mr. WALDEN. Thank the gentlelady.
And now we will go to Mr. Latta, the vice chair of the subcommittee, for questions.
Mr. LATTA. Thank you, Mr. Chairman. And, again, thanks for
our panel for being with us today. Appreciate your testimony.
Ms. Mago, if I could start with you at this time. What would be
the effect of the FCCs proposal to attribute stations under a JSA
in calculating a broadcasters media ownership cap?
Ms. MAGO. For many of the stations that have been operating
under the JSAs that were, in fact, proved by the Commission, it is
going to mean that they are going to have to unwind those operations within the 2 years, as Mr. Lake described, and that means
that they are going to have to either go out of business, they are
going to have to find other sources of revenues, because those efficiencies that they have been operated under have been what have
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allowed them to provide greater service to their communities. So
there is going to be a reduction of the amount of the service that
is available in the communities.
Mr. LATTA. OK, and the next part of the question then, what effect would that have when you are talkinglooking at a reduction
for services in that community, or communities? What would you
see that as?
Ms. MAGO. I seem that as harmful to the American public, and
that reduction could be that, for example, where you have the station that I referred to before in Wichita, Kansas, where the Spanish news operation is being facilitated by the fact that there is a
joint sales agreement that is in that market. That might well have
to go away or find some other way of being financed that would not
give it the kind of resources that they need. Other markets have
similar stories that go with it, where the Tuvalu College that is
also operating under a JSA, and they have presented evidence to
the Commission that they would not be able to provide the services
that they could to their community.
Mr. LATTA. All right, thank you.
Mr. Lake, you note in your testimony, The Further Notice tentatively affirms that media ownership limits remain necessary in
the current marketplace, despite the prevalence of new electronic
media. So how is the FCC making that determination without first
having conducted a thorough review of the marketplace to justify
those limits?
Mr. LAKE. We looked at the record as it now exists, and while
my friend Jane is right that the market has evolved quite a bit
since she began law school, it continues to evolve. I am sure it will
be very different 5 years or 10 years from now. And our task is to
try to determine what rules are appropriate for the current state
of evolution. And one of the things that we find in the current
record is that, while distribution of newslocal news and information, in particularhas become much more diverse, people find it
on the Internet and elsewhere, the sources of that news and information remain principally the traditional media: newspapers and
broadcast television. We also note that, while broadband is changing everything in the country, there remains about 2030 percent
of the population that doesnt have broadband at home.
In 5 years or 10 years, if that figure is much closer to 100 percent, and if the electronic media are generating more original news
than they do today, that might have tremendous implications for
our media ownership rules. What we are trying to do is to look at
the state of the market today and decide what rules are appropriate to the market today. And, as I say, we are basing our tentative conclusions on the 2010 quadrennial record. We have invited
comments on our Further Notice and will look very carefully at the
updated information that people submit.
Mr. LATTA. OK. Well, thank you.
Mr. Bank, if no changes are made in the current regulatory system, and the ownership caps remain where they are today, what
is your prediction for the world of traditional media in the next 5
years?
Mr. BANK. Well, what I would say is that the perspective of the
capital markets on a daily basis, on an hourly basis, is the intense
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increasing competition that is being ratcheted up by a competing
ecosystem from the online media world.
I think that over that period of time, over a 5-year period of time,
we would expect to see continued wallet-in-mind share loss by the
traditional medial players to online media. I dont think they are
going out of business in the traditional media world, but I think
it risks being a less healthy environment. And because of that, you
know, the capital markets will have to evaluate how they are willing to fund growth in that area.
Mr. LATTA. Let me follow up withyour testimony is very helpful in showing us the trends in todays media consumption. What
does that mean to the investment community overall when you
look at that?
Mr. BANK. I am sorry, what
Mr. LATTA. When you look at the trends that you are talking
about, what does it mean to the investment community when you
are looking at todays
Mr. BANK. Well, I
Mr. LATTA [continuing]. Todays world out there, and into the
next few, you know, 4 to 5 years?
Mr. BANK. I think, again, the focus of the capital markets is to
invest for the greatest potential return, and that is often connected
with the long-term growth perspective. And I think if you look at
a lot of those exhibits, what you see is, on some level, a decline of
share potentially, going from traditional media to online, and typically dollars will follow that share, whether it is advertising revenue, viewership, whatever it is you can measure, I think those are
the kinds of things that capital tends to chase.
Mr. LATTA. Thank you very much.
And, Mr. Chairman, my time has expired and I yield back.
Mr. WALDEN. Thank the gentleman and for his questions, and
you for your answers.
We will now go to Mr. Lujan from New Mexico. Thank you
for
Mr. LUJAN. Mr. Chairman
Mr. WALDEN [continuing]. Your questions.
Mr. LUJAN. Mr. Chairman, thank you very much.
Mr. Boyle, with your recommendation to eliminate the ban, are
there any restrictions that you would replace the ban with?
Mr. BOYLE. No, we think that the ban should be fully eliminated
for radio-newspaper combinations, but also TV-newspaper combinations. It makes no sense that a top-rated television station in a
market that has resources and a deep commitment to journalism
cant invest in a local newspaper in that market if that newspaper
becomes available. Investigative, original reporting that is professionally edited is very expensive to do. And we dont think there
is going to be a massive wave of mergers. There may be some markets that a newspaper comes on the scene, and we think, for too
long, investors have been on the sidelines.
Mr. LUJAN. Mr. Boyle, while I have concerns with the response,
with this reason. If there are no restrictions, I dont see anything
that keeps one entity from controlling everything, and we only get
news from one source. And that is where my concern is, and that
is why I was hoping that I would hear some restrictions, but maybe
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we could have a conversation about that later. I only have a few
minutes, I am going to move on.
Ms. Mago, I appreciate very much the remarks bringing attention to an outdated rule, a bygone era, a marketplace that has
changed dramatically with rules that were put in place in the 70s.
Should we get rid of DMAs?
Ms. MAGO. I am sorry?
Mr. LUJAN. Should we get rid of DMAs?
Ms. MAGO. DMAs are actually fairly current. They reflect the
market patterns in
Mr. LUJAN. DMAs were put in place in the 40s and 50s.
Ms. MAGO. The designated market areas are something that has
been created for the Nielsen services, and, in fact, they get
Mr. LUJAN. So
Ms. MAGO [continuing]. They are adapted as you go along
Mr. LUJAN. So
Ms. MAGO [continuing]. That indicate
Mr. LUJAN. If I may. So we should get rid of an antiquated rule
that was written in the 70s, but not antiquated rules that were
written before then?
Ms. MAGO. No, sir. I am contesting the notion that it is simply
that the DMAs have not changed. In fact, they do change, and they
are reflective of the market patterns and the commerce that is
within any given area.
Mr. LUJAN. So DMAs create a bubble.
Ms. MAGO. I am sorry?
Mr. LUJAN. DMAs create a bubble for broadcasters to upgrade
them, correct?
Ms. MAGO. No, they reflect the markets where the broadcasters
are, in fact, operating. They are the commerce area around where
the broadcasters and the others in that market are. They reflect
the businesses that advertise on whatever broadcasting service is
there, and they, in fact, are updated.
Mr. LUJAN. Very good. That is another conversation I hope that
we can have
Ms. MAGO. I would be happy to talk with you more about that.
Mr. LUJAN [continuing]. In the future as well. Yes, Ialthough
we have learned about that where there are local communities all
around the United States and orphan counties that dont get local
broadcast news.
Ms. MAGO. It
Mr. LUJAN. So, clearly, something is broken when local, rural
Americans are left out in the dark and dont know what is happening in their backyard, and when local newspapers are providing
coverage up there because it is too far to commute to take a local
newspaper. I come from a State where my legislative district takes
8 12 hours to drive across. Out here, I drive through six or seven
States.
Ms. MAGO. Um-hum.
Mr. LUJAN. But people seem to forget about rural America, and
that is where my concern is in that particular area, but we will
talk
Ms. MAGO. I would be happy to talk with you more about that,
and really address your concerns.
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Mr. LUJAN. I appreciate that.
Ms. Gonzalez, you noted in your testimony that since 2006, there
has been nearly an 80 percent decrease in full-powered TV station
ownership by African-Americans. Some have used that number to
argue that existing media cross-ownership rules have done little to
preserve diversity in broadcast ownership. I find it interesting,
however, that over roughly the same period, the use of GSAs by
broadcasters has grown substantially. For example, data indicates
that while JSAs were only found in 4 percent of the ownership
transfer applications pending before the FCC between 2001 and
2004, by earlier this year had ballooned to 25 percent.
Based on these figures, do you think there is a correlation between the tremendous uptake in the use of JSAs that, in many instances, help broadcasters go around the media cross-ownership restrictions, and the decline in minority ownership of broadcast TV
stations?
Ms. GONZALEZ. Yes. There seems to be a correlation. I will note,
in Ms. Magos testimony, she mentioned one example in Kansas
where there is a JSA that is providing Spanish language news that
didnt otherwise exist in that DMA. I think that example is a prime
candidate for the waiver process that the FCC articulated in its
JSA order several months ago, andbut for the most part, these
JSAs seem, and the consolidation generally, seem to have been diminishing owners of color, making it more difficult for us to enter
the market, and all around just not a good situation for diversity.
In fact, there are also examples of JSAs where there is an owner
of color involved, but that person doesnt have control of the programming and a path toward sole ownership of the station.
We want genuine involvement and ownership by people of color.
That doesnt seem to be happening in this current marketplace.
Mr. LUJAN. I appreciate that.
Now, Mr. Chairman, I know that I have not heard any of my colleagues say anything to the contrary that we dont want to see
more ownership with minorities as well. And I think this an important question that I hope that we can flush out and just get more
information on as we have the conversation pertaining to JSAs as
well, and I really appreciate the panel that you have put together
and the responses today. I still have many questions as well that
I will submit into the record, but again, thank you for bringing this
panel together, Mr. Chairman, and, Ranking Member Eshoo.
Thank you.
Mr. WALDEN. Yes, thank you, and thanks for your participation.
We will now go to Mr. Kinzinger from Illinois.
Mr. KINZINGER. Well, thank you, Mr. Chairman, and thank you
all for being here on these very important issues.
I am going to start with you, Mr. Lake. I have just a couple of
kind of quick questions.
The last time that the media ownership rules were substantively
updated was 1999. That was quite literally the last century, and
in the ensuing 15 years, the media landscape and specifically the
options people have to obtain and consume information have expanded exponentially. It is largely thanks to the Internet and the
availability of online mediums.
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It has become apparent that the FCC is either unable or unwilling to complete the congressionally mandated media ownership review. Is Congress going to have to rewrite and deregulate the current media ownership rules to finally match the intent of the 1996
Telecommunications Act, and to finally provide regulations that
match the realities of the current media landscape?
Mr. LAKE. I can say the Commission takes very seriously its responsibility to review the ownership rules, and the current Chairman has committed to take a very serious look and to have recommendations for the Commissioners by mid-2016.
Mr. KINZINGER. Good. And I hope you can take back the concerns
of the committee on that, very loudly. And, Mr. Lake, the Commission adopted an expedited process to review requests for waivers of
the recently adopted JSA rules. As you noted, the Bureau is tasked
with acting on any waiver request within 90 days of the close of
the record, provided there are no circumstances requiring additional time for review.
Could you describe what those circumstances are, and how will
applicants know that such circumstances exist?
Mr. LAKE. We havent confronted circumstances such as that,
and I dont know what they might be. There might be a need for
further information that hasnt been available, but we dont anticipate that that circumstance will happen very often. We are very
much aware of the commitment we have to act, if at all possible,
within 90 days after the record closes, and that is what we will try
to do.
Mr. KINZINGER. And so if there is a circumstance, will you guys
be communicating this well to the applicants?
Mr. LAKE. Absolutely. If we identify such a circumstance, we will
make clear what that is.
Mr. KINZINGER. And will they know immediately?
Mr. LAKE. We might not know, except during that 90-day period,
but again, I think this is very hypothetical because we dont anticipate that that will occur very frequently.
Mr. KINZINGER. And how will this new speed of disposal metric
be incorporated into the management of the Bureau? What happens if it is not met, and will you commit to seeing this deadline
met?
Mr. LAKE. Excuse me, will we commit to?
Mr. KINZINGER. To seeing this deadlineto seeing any deadlines
met?
Mr. LAKE. Yes, we are committed to meeting that deadline if at
all possible. And, again, I dont anticipate there will be many circumstances in which it is not.
Mr. KINZINGER. OK. Ms. Mago, the FCC has an open proceeding
to do away with the UHF discount in terms of how UHF stations
are countered against the national broadcast ownership cap. This
discount was put into law at a time when UHF signals were seen
as inferior to VHF signals, which, after the digital television transition, is no longer the case.
Does NAB have a position on that proceeding?
Ms. MAGO. Yes. NABs position is that you really shouldnt be
looking at just the UHF discount aspect of this without looking at
the larger rule regarding the national ownership cap. It makes no
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sense in a world where you have grown up with the various discounts, with the ownership sizes, to look at that without considering the larger rule. It is not a standalone rule.
Mr. KINZINGER. OK.
Mr. Chairman, I still have a minute and 30, but I will yield back.
Mr. WALDEN. Gentleman yields back.
Chair now recognizes the gentleman from Illinois, Mr. Rush.
Turn on your mic, please.
Mr. RUSH. Mr. Chairman
Mr. WALDEN. We are glad to have you back, Mr. Rush.
Mr. RUSH. Well, and I am very glad to be back, Mr. Chairman,
and thank you for all your concern, both for me and my wife. I really appreciate it.
I want to welcome all the witnesses, and I want to let you know
I appreciate your testimony, and I appreciate you spending this
time with us to discuss the FCC media ownership rules. And this
is an issue, an area of concern that I have had over the last 21
years that I have been in Congress, and certainly in terms of my
years on this committee and on this subcommittee, it has been one
of my primary concerns. And I have taken the position over these
past couple of decades that one of the reasons why I sit on this
committee is to increase the number of minority owners of media
across the country. And I must say, I am dismally disappointed. I
have been disappointed over a number of years because I dont see
the vigorous commitment from the FCC. I am disappointed in the
excuse-making and the continual excuse-making, and it is worse
now than it has ever been in the last 20 years that I have been
in this Congress21 years that I have been in Congress. This is
the worst time for media ownership by minorities. As a matter of
fact, if I am not mistaken, in the last 3 or 4 years, the percentage
of media ownership by minorities has dropped almost 60 percent.
That is not a good report. That is a horrible report. And as we sit,
there are only four African-Americans who own television stations
in the Nation, in this great Nation of ours. And we have an agency
that is responsible for ensuring that the airwaves of the American
peoplethat there is some equality, equal access not only to content and viewership, but also from a point of view of ownership.
And so my question to you, Mr. Lake, is, Does the FCC know
how many minorities and women are employed by minorities, and
women broadcasters, compared to how many are hired by nonminority and nonwomen broadcasters? Do you all keep that kind
of information?
Mr. LAKE. We do not have that employment breakdown. We have
EEO rules that require all stations, regardless of their ownership,
to do outreach in their employment.
Mr. RUSH. Well, how do you justify in the FCC, how do you justify a decrease of 60 percent of minority owners?
Mr. LAKE. The Commission does have a longstanding goal, as you
know, of promoting minority and women ownership of broadcast
stations
Mr. RUSH. No, I dont
Mr. LAKE. We hear your dissatisfaction.
Mr. RUSH. I dont know it because I hear about it, but I have
never witnessed it. I have never seen that posture and that atti-
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tude. I have never seen that program and that commitment by, I
would say, most of the Commissioners over there. I hear of good
intentions, I hear a lot of platitudes, I hear a lot of tear-jerking,
but it is all saying, and it is allI dont see the work being done.
I dont see them rolling up their sleeves and solving this problem
that should be solved. It should have been solved a long time ago,
but I still just hear a lot offrom the FCC, I hear a lot of, Yes,
you are right, yes, we areit is longstanding, but how long is
longstanding?
Mr. LAKE. We share your dissatisfaction with the results so far,
but we are taking concrete action. One of the results of our recent
action on JSAs, we think, will be to open more opportunities for
truly independent owners of TV stations, including minority and
women owners. As you probably know, there was a list of about 30
civil rights and other public interest groups that supported our taking that action, and we hope that they are right and that we are
right; that it will open opportunities for minority owners.
We also recently relaxed our approach to foreign investment in
broadcast stations. Again, civil rights groups urged us to do that
as a way of trying to solve some of the access-to-capital problems
that minority owners face. So we are taking concrete action. We are
constantly looking for additional things we can do. We are always
subject to the very strict Supreme Court rules that have been put
down as to taking any action that is actually race- or gender-based,
but, again, one of the things that we did in our Further Notice that
was recently announced was to review that constitutional law very
carefully, and the state of the evidence that we have, and to call
for further evidence that might someday allow us to actually be
able to justify to the Supreme Court taking race- or gender-based
action.
Mr. RUSH. Mr. Chairman, I have one more question, if you dont
mind.
Mr. WALDEN. Go ahead, Mr. Rush.
Mr. RUSH. If I could. Have you ever heard of the critical information need study?
Mr. LAKE. Yes, I certainly have.
Mr. RUSH. Why was it terminated?
Mr. LAKE. The study was intended to gather data anonymously
to help determine what the information needs of communities are
and whether they are being met. When the current Chairman took
a fresh look at that study, he decided that some of the questions
appeared inappropriate, and he terminated the study.
Mr. RUSH. OK. Again, here we go again, all right. So the study
wasnt done according to maybe the standards of the new Chairman, but instead of revising it, you end it. All right? Instead of
adapting or coming up with some new questions that might have
fit the standards of the Chairman, you ended it. And it was a study
that should take place, and FCC was headed in the right direction,
but again, you have ended that study, which would have given us
information, all right, that would be able toMr. Chairman, I
thank you for your indulgence. I am so upset and angry about this,
I think I should end this right now, my line of questioning. Thank
you so very much, and I thank the witnesses, but please I want to
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go on the record that I am absolutely, totally disappointed in the
FCC and their position on minority ownership of marketplace.
Mr. LAKE. And I would be happy to respond on that if you want
to take the time.
Mr. WALDEN. We need to actually move on, but, Mr. Rush, thank
you. I know you are passionate about this, and we all know that,
and I appreciate your participation in the hearing.
We will turn now to, I believe, the gentleman from Illinois, Mr.
Shimkus, for 5 minutes.
Mr. SHIMKUS. Thank you, Mr. Chairman. And I do have great respect for my friend from the Chicago area, and it was important
for him to get his time that he needed to finish up.
I too am disappointed with the FCC, but not for the totally
sameand I said in the opening statement, when Federal agencies,
regardless of who they are, dont comply with the law and delay,
it makes it difficult for those of us and conservatives that are in
the country to say there is a legitimate reason to have that agency.
If our Government and our agencies would comply with law and be
expeditious in the processing, it would make it easier, and I would
just hope you would take that back to the FCC and the Commissioners. That is the importance of getting these Quadrennial Reviews. I mean it has to be embarrassing to come up here and say,
really, we havent done 2010 and 2014, and we are going to get
around to it. So I am just beating a dead horse, but again, you
dont make it easier for us.
Let me go to Mr. Bank, please. Unless you addressed this in a
question and answer while I was gone, because I am up at the
Health Subcommittee meeting too, I am not sure you addressed the
impact of the FCCs changes to the attribution of joint sales agreement in your statement. You may have gotten it in a question, and
if you did, I apologize. Can you tell us about the investment communitys reaction to the FCCs recent announcement that they will
force broadcasters to unwind joint sales agreements if the broadcaster finds itself over the local ownership cap?
Mr. BANK. Well, the sun setting of the JSA provisions for some
of those stations without a grandfathering provision has been certainly concerning to the capital markets. You know, I think the
capital markets were initially just kind of confused, but the reality
is those are events that took value away from those companies. I
think it was reflected in the reaction of the capital markets.
Mr. SHIMKUS. Yes, and people know who follow this committee
and follow my service here, you know, I represent 13 of the State
of Illinois, I only have 6 media markets, most of them are small
or medium-to-small markets. Without this ability, they are not
broadcasting, or they are broadcasting inadequately. So the argumentso I am very concerned, as other communities are concerned
about, as Bobby is concerned about minorities, as the Hispanic
community is concerned, I am concerned about everyday news to
rural America, and that is the opportunity that we are losing by
what the FCC is proposing. And I think Mr. Bank identified one
of them.
Ms. Mago, it is expensive, and this kind of ties into the whole
debate, it is expensive to run a TV station or a newspaper in this
day and age. I think it would be difficult to make it work, that is
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why I am here and not out there trying. Mr. Walden tried in a different era, pretty much, but there are successful companies out
there
Ms. MAGO. Um-hum.
Mr. SHIMKUS [continuing]. With proven track records, and have
continued to do so, and do it well. Doesnt it make sense to a lot
of good companies with good resources to put their expertise to
work in failing stations or newspapers?
Ms. MAGO. Absolutely. We believe that good stations can invest
in their communities, create greater localism, also create more opportunities. They can invest in quality journalism, provide better
service to the communities, and that is all good for the American
people.
Mr. SHIMKUS. And just the stories that I know from local, small
to medium-sized markets, you have helicopter access where you
didnt have it before, you have real news broadcasting versus satellite in news, you might have a new state-of-the-art weather station that may be more predictive than the old one on the old station. So that point needs to be made as we do, as members of Congress, bring our differing voices here to try to collectively raise
those concerns. Rural America cannot be left out in the ability to
receive real-time, accurate information, and these agreements help
them maintain that in a very competitive world. So I appreciate
you all being here, and again, I apologize for not spending more
time with you, Mr. Chairman. A great hearing. And I yield back
my time.
Mr. WALDEN. Thank you, Mr. Shimkus. We appreciate your participation, as always.
We will now turn to Mr. Long as our final Member with questions. Mr. Long.
Mr. LONG. Thank you, Mr. Chairman.
Ms. Mago, you may not be able to answer this question, as executive vice president and general counsel, legal and regulatory affairs, the National Association of Broadcasters, but I hope you can.
Are you familiar with a program that the NAB has to encourage
minority ownership of stations?
Ms. MAGO. Absolutely. In fact, my other capacity at the NAB is
that I am the general counsel advisor to the National Association
of Broadcast Education Foundation, which runs the program that
you are talking about.
Mr. LONG. OK, good. And this was not a setup because I had not
talked to you before, and I didnt know that you were that familiar
with it, but I am familiar with that and I am given to understand
that it is a very intense program, very successful. I have talked to
people that have gone through and become owners of stations. So
for my friend from Illinois, I hope you realize that the NAB is
reaching out and doing a lot in that direction.
My next question is for Mr. Lake. If you have a successful broadcaster, what advantages have that successful broadcaster to fold
into a JSA with another company, what would be his advantage?
If I have a successful, rock em, sock em station, on the air, making
a lot of money, what is my advantage to fold that in with a JSA
with another station?
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Mr. LAKE. What a number of stations seem to have concluded is
that they would very much like to have a duopoly in a market in
which our rules dont allow a duopoly, and that going into a JSA,
which is often combined with a number of other entanglements between the stations, is a way, essentially, to go around our local TV
rule and establish a de facto duopoly where a true duopoly or a
legal duopoly wouldnt be allowed.
Mr. LONG. So it would be good to give up a large percentage of
my profits and things so I could fold into this arrangement if I am
a successful station?
Mr. LAKE. Typically, these arrangements are not between two established, successful stations.
Mr. LONG. Exactly. In my area, we have a station that came on
the air as a UHF, and, yes, I am old enough to remember that, and
it was, for all these years forward, it was kind of like Ted Macks
Amateur Hour, and there are a few of you in here old enough to
remember Ted Mack, but it was going to fold, it was going to be
out of business. I dont care if you would have brought in a minority owner, a nonminority owner, whoever it is, at the end of the
day, these stations have to make money, they have to be successful.
And I think that the message I would like for you to take back to
the FCC, other than trying to do a Quadrennial Review in less
than 10 years or something like that, would be that they need to
be cognizant of these operations, the stations I am talking about
in my market, in my hometown that I am talking about in particular, that news station that used to look like Ted Macks Amateur Hour now is winning national awards. Yes, they folded and
they closed the building they were in, and tried to lease it or tried
to sell it. They moved across town into a successful station, but
thatI dont understand, I mean, I came from a 30-year business
background, I dont come from politics. I, you know, I wasnt a politician before I ran for this, so at the end of the day, I did talk radio
for 6 years and I know, when you do talk radio, you want to put
people in those stores. You have to be motivated to do a good show,
get in there, and sell product and have people support your sponsors. So it is all about capitalism, making a profit, and I just think
that if you all blow up this thing, that station that is getting all
these news awards now that used to do terrible, is going to be
gone. Whether you bring in a minority owner, or whatever kind of
owner you bring in, if it is not a successful station, it is not going
to work very well.
So I guess another question for you would be, would you rather
that these failing broadcasters, such as the one I described, go out
of business, than to be influenced, as you said earlier, by having
a JSA with a successful broadcaster? Are you really that worried
about the influence they may have ifwould you rather they be
out of business?
Mr. LAKE. A few things in response to that. The facts of
these
Mr. LONG. Answer that question first, if you will.
Mr. LAKE. Yes.
Mr. LONG. Yes or no, would you rather they be out of business?
Mr. LAKE. We have expressly in our rules an opportunity for a
station that is failing to obtain a waiver of our local TV rule, and
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we have granted failing station waivers. So if a station is failing,
it doesnt have to take a backdoor of trying to become dependent
on another station through a JSA, it can come in and seek a waiver. We also have indicated that we are wide open to consider waivers of the JSA attribution rule itself in appropriate circumstances.
There are very different circumstances. There are circumstances in
which these de facto duopolies have been established between two
major network stations. Clearly not a failing station situation.
Mr. LONG. But if this failing station did a JSA with a successful
station like I have described, and you blow this up or unwind it,
then that station would either have to cease to exist, or they would
have to go find another space across town and go back to being a
failing station. I mean it is going to be too late to come in for this
waiver you are talking, correct, or not?
Mr. LAKE. It may not be too late. Again, we have entertained and
granted a number of failing station waivers.
Mr. LONG. OK. Thank you all for being here today.
And I have gone over my time, so if I had any time, I would sure
yield her back.
Mr. WALDEN. I appreciate that. Thank the gentleman for his participation, and all of our witnesses for your testimony and answer
to your questions. I am sure we may have a few more for the record
that, if we do, we will send to you and look forward to getting your
response to it. Obviously, this is an issue that spans the spectrum
of philosophy and the committee in a marketplace that is changing
pretty dramatically and rapidly, and it is an issue we will continue
to pursue one way or another. So thank you all for your participation.
We stand adjourned.
[Whereupon, at 12:16 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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